Coffee prices. Coffee is the world’s second largest legal export commodity (after oil) and is the second largest source of foreign exchange for developing nations. The United States consumes about one-fifth of the world’s coffee.

The International Coffee Organization (ICO) computes a coffee price index using Colombian, Brazilian, and a mixture of other coffee data. Data are provided for the ICO price index (in $US) from January 2001 to December 2005.

a) Here are the last several values of the series: 88.48, 85.31, 78.79, 82.55, and 85.93. What price does this model predict for the next value in the series?

b) The next value in the series was, in fact, 86.85. Compute the APE.

c) Find a prediction based on a 2-point moving average.
How does it compare with the AR model?

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Coffee price 90 75 88 60 45 + 10 20 www + 30 40 50 60 Month (Jan 2001 = 1) Here's an autoregressive model for the composite prices. Dependent variable is: Composite R squared - 94.8% s3.892 with 573 Variable Coeff R squared (adjusted) - 94.6% 54 degrees of freedom Intercept lagl 1ag2 SE(Coeff) t-ratio P-value 1.59175 1.941 0.820 1.22856 0.1327 9.26 0.4157 0.0001 -0.247256 0.1350 -1.83 0.0725